Ed Warner, chair of Foresight Environmental Infrastructure (FGEN), has announced he is stepping down after four years on the board as the company published its first set of annual results since re-setting its strategy a year ago.
Warner, who will leave at the annual general meeting on 17 September, will be succeeded by senior independent director Stephanie Coxon, an auditor and former head of PwC’s investment trust capital markets team.
Commenting on the previously released 6.2% underlying investment return generated in the 12 months to 31 March, Warner said: “Over the past year, we have made purposeful progress in executing the clear and disciplined strategy we outlined last year: emphasising proactive management of our existing assets, prioritising a core portfolio of environmental infrastructure, and continued delivery of both stable income and long-term capital growth.”
Including 7.96p of quarterly dividends, shares in the £514m investment company had as of yesterday returned 19.6% in the past year after a near halving in a share price discount that hit 40% last November. That makes the 9.7%-yielder the top performer in a struggling renewables infrastructure sector where the average return of 16 funds has been 2.1% loss.
Under Foresight portfolio managers Chris Tanner, Chris Holmes, Edward Mountney, FGEN also leads the sector over five years with a 30% total return and ranks third over 10 years on 71.43%, according to figures from the Association of Investment Companies.
Nevertheless, at 82.8p the shares stand 21% below their net asset value (NAV) of 105.2p, which dipped from 106.5p after payment of the covered dividends.
In response to the wide discount, FGEN completed a £30m share buyback programme in September and in October changed Foresight’s fee so that half of the fund manager’s fee was based on share price to incentivise its efforts to narrow the gap to NAV.
As the discount averaged over 10% in the past year, it will trigger a second continuation vote at the AGM. Warner, a former banker who will remain busy as chair of HarbourVest Global Private Equity (HVPE), hoped that having met many shareholders to discuss the refocused income strategy, and its 8%-10% investment return target, they would have the confidence to support FGEN’s continuation. FGEN comfortably passed the first continuation vote last September with 93.8% of votes in favour of continuation.
The bedrock of FGEN’s income portfolio is its 71% allocation to a range of renewable energy projects encompassing wind, solar, anaerobic digestion, biomass, energy-from-waste and hydro. These sit alongside 11% in non-energy generating assets such as battery storage units and low‑carbon transport.
It also holds 18% in three growth assets, CNG Fuels, Glasshouse and Rjukan, which Warner said had “passed significant operational milestones this year, demonstrating tangible progress in their ramp-up phase”.
CNG Fuels is the UK operator of a network of biomethane refuelling stations supplying renewable Bio-CNG to heavy goods vehicle fleets. FGEN has invested £28.4m since 2020 and is committed to provide a further £5.5m.
Rjukan is a land-based fish farm built in Norway that uses recirculating aquaculture technology to ensure water is continuously cleaned and reused. FGEN invested a further £8.1m in the last financial year, taking its total investment to £48m since July 2022.
Lastly, the Glasshouse is a 2.4 hectare site operated by Glass Pharms, a medical cannabis cultivator that supplies eight leading clinics. The controlled environment facility is located next to one of FGEN’s anaerobic digestion plants from which it takes excess heat and electricity. Production increased 250% year on year, said FGEN, which provided a further £2m loan last year on top of its 10% equity stake.
Our view
James Carthew, head of investment company research at QuotedData, said: “FGEN has produced a solid set of results that demonstrates the attractions of diversification and investing in some growth assets. The year end coincided with a sell-off in markets and a wider than usual discount, which weighed on shareholder returns. However, the discount has narrowed significantly since and the better news coming out of the Gulf should help ease fears of much higher interest rates (which could have hit the NAV).”
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